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After we had first announced that a new housing bubble had taken root in the U.S.
economy beginning in July 2012, we soon followed up with
additional analysis that suggested that it had perhaps begun to decelerate to
a more sustainable level after December 2012. Recently revised data from the U.S.
Census Bureau for the median sale prices of new homes in the
United States through March 2013 now confirms that there has been
no slowdown in the rapid inflation of new home sale prices
observed since July 2012.

Since 1967, there is only one period of rapid price escalation
that even comes close to matching the current trend for median
new home prices in the United States: the initial inflation phase
of the first U.S. housing bubble, which ran from November 2001
through September 2005 - approximately the time at which the
Federal Funds Rate began to converge with the
level that would apply if the Federal Reserve had been following
the Taylor Rule.

What is more remarkable however is that the trailing twelve-month
average of median new home sale prices through February 2013 has
now exceeded the peak value set at the height of the inflation
phase of the first U.S. housing bubble. The previous record for
this figure was set in March 2007 at $245,842. In February 2013,
the trailing year average of median new home sale prices is now
$246,167 and the preliminary data for March 2013 has it
increasing further to $246,767.

These new figures may be subject to revision during the next
several months.

Since the inflation phase of the second U.S. housing bubble began
in July 2012, the trailing twelve-month average of median new
home sale prices has increased by an average of $2,532 per month
through February 2013. By contrast, the trailing twelve-month
average for median household income in the U.S. has increased by
an average of $121.56 per month, as median home prices have been
rising by an average of roughly $21 for every $1 increase in
median household income.

In more normal circumstances, or at least those we've observed
since 1967, a $1 increase in median household income would
typically correspond to somewhere between a $3 to $4 increase in
median new home sale prices.

Previously on Political Calculations

The U.S. Housing Bubble Is
Back - we apply our groundbreaking analytical methods to
determine that a new housing bubble has begun to inflate in the
U.S. economy.